Don’t Outsource Only When It’s Too Late

In my role as an HR professional since 2010, I have observed a steadily growing demand for outsourcing of daily HR administration, particularly for the management of employee payroll and benefits. When I asked the companies why they chose to outsource, the common replies I received were:

HR is swamped and needs more time for higher value work”,

Our administrator just left the company”, or

The new person on the job is inexperienced and will benefit from external expertise”.

Sometimes the client simply prefers having their confidential information managed externally or needs the vendor to provide the legwork for better process management.

More than just automating administrative work

From the reasons cited, it became apparent that these companies viewed routine HR administration as a peripheral corporate function where ownership of the capability was not critical. Routine reports from the vendor were sufficient for the clients to keep up to date with payroll activity.

On several occasions my question would be redirected in the form of “Why should I use your services versus adopting a (hopefully affordable) product internally to boost productivity?

Cheeky. Why indeed. Surely a good software makes basic HR administration idiot-proof. For one, it’s cheaper than paying for a service.

The answer is you should, if all you seek is automation of a singular non-core function to reduce operating expense, and if you’re certain of the said product’s capability. But don’t overlook the benefits of outsourcing core functions or a cluster of adjacent functions. I recall discussions on payroll quickly turning into a full review of the client’s HR policy, setting up of proper documentation, pushing for efficient workflow and recommending productivity tools across functions – finance, sales and recruitment.

Control is more important than ownership

Control over critical capabilities counts for much more than mere ownership. With outsourcing, control can exist via a service level agreement (SLA) for on demand access to professional experience and tested methodologies.

Let’s take a step back to look at the bigger picture. Factors that weigh in on what to outsource differ based on a company’s size, stage and sustainability. But the principle behind outsourcing must be consistent. Your company could have ten or a thousand people, or be at an early stage aiming for high growth, or mature and operationally stable with good profits. At any point your business must have a focus to be competitive with a strategy that optimises available resources.

While you’re content to dismiss outsourcing as an interim solution, your service providers are heavily incentivised to pursue service continuity.

Outsourcing should not be your last resort

Outsourcing typically exists as a fallback, and frequently considered as a last option (and a temporary solution). Are you afraid of being held hostage by your service provider as dependency increases? Or are you concerned about ongoing disclosure of sensitive business information?

While you’re content to dismiss outsourcing as an interim solution, your service providers are heavily incentivised to pursue service continuity. Churn is costly to a business due to customer acquisition cost, loss of up-selling and referral opportunities, potential loss in brand value and disruption to processes. You understand this because you have customers too.

Outsource to find partners who keep up with technology

A good service provider, and you could very well use the term ‘service partner’ instead, evolves with your business. Initially the service value could be knowledge expertise (“I never knew that law existed!”) coupled with implementation of a strong scalable workflow (“previously I struggled to get my stakeholders to change habits”), topped off with the support of smart technology (“everybody adopted the new software with ease”). Ideally this arrangement is approved at a fraction of the cost to insource. Even if a premium is imposed the afterthought should be “it was worth every dollar”.

As business demands grow, expanding the outsourced scope can really make sense. And that’s when progressive partners jump in to lengthen the value chain. It’s really no surprise that they will be the biggest advocates of productivity tools that band into an integrated suite. Newer enterprise solutions are actively moving to cloud and openly sharing capabilities with one another. Because of this, service partners are quickly evolving from focused specialists to process improvement consultants for multiple business functions.

They actively explore new software, compare features, test user support level, push for new enhancements, recommend integration with other products, all the time knowing that with every recommendation made their own reputation is at stake. Despite what you’re inclined to think, their service commitment is to you not the software company. It’s really only natural for them to advocate products they genuinely value.

Outsource to explore improvements for other business functions

Many of us love the ease of use that’s typical of good SaaS products, yet it’s nice at times to have a product expert objectively guide us through the pros and cons of their recommendations. We’ve all experienced that moment when we’re undecided about the purchase, needing that extra bit of validation to commit – validation from a reliable source I might add.

Your next query on ‘accounting practices’ could proceed to an insightful discussion on good bookkeeping practices, proper tax reporting, compliant payroll processing, and fair allocation of employment benefits like leave and claims. The conversation can then progress from business regulations to business efficiency by exploring new technology for customer management, service support, chat, logistics, inventory, and analytics. All in a day’s work for an enlightened service partner.

A good service provider, and you could very well use the term ‘service partner’ instead, evolves with your business.

Conclusion

Thus far the Talenox mission has been supported by many partners and direct users who are tired of other products that refuse to evolve. They understand the importance of adapting to remain competitive. And they are the ones that continue to be your best choice for a long-term partnership. I’ll say it again, outsourcing does not have to be the last option, nor a short-term solution.

Keen to speak to someone about outsourcing? We’ve got a list of Payroll Experts who can provide you a wide range of services and advice. Look them up and speak to them today 🙂

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